There has been a lot of bad news lately, and the resulting fear is very real. DeFi looks dead, altcoins have completed their lifecycle back to $0 (I think this is a joke), and the price of bitcoin (BTC) has fallen below what even the smartest brains in the room expected.
The unifying theme of the last bull market seems to have been greed. Everyone has become too arrogant and too greedy, and it shows in the amount of debt and leverage that is spinning up as 3AC, Celsius, BlockFi and Voyager grapple with the real threat of bankruptcy.
It seems that bitcoin miners and bitcoin mining companies were also not immune to feeling overly enthusiastic and believing that “only growth” was a fact, until the price of bitcoin reached the long-awaited $100,000 target that most analysts held.
Historically, bitcoin miners have been an elusive species who are quiet and unwilling to spill sauce on the public, but Cryptooshala has had some success in securing a moment with HashWorks CEO and founder Todd Esse to discuss the current state of the mining industry and its forecasts. where the market may move over the next year.
Cryptooshala: Bitcoin is trading below the selling price and also below the production cost of miners. The price is also below the previous all-time high and the hashrate is falling. Generally, analysts on the net identify these numbers reaching extremely low values as a buying opportunity for a generation, thought?
Todd is: I do believe that current prices represent an investment opportunity as current prices probably do not reflect lucrative production margins as the industry is currently structured. However, prices may continue to be under pressure in our view as the mining industry and associated leverage are reset or reconfigured.
CT: What is the current state of the BTC mining industry? We have heard that leveraged miners go bust, sub-optimal, inefficient miners are shut down, hardware can be seized or liquidated in a sale. The share price of listed mining companies and cash flow are also looking pretty bad right now. What is going on behind the scenes and how do you think it will affect the industry in the next six months to a year?
TE: In our opinion, mining still offers an attractive investment return for those who are selective in their approach and have long-term goals. Most of the currently installed mining capacity is under 85 TH/s ASICs and energy contracts, which are not managed the way a traditional large-scale energy consumer would be.
We’ve seen this movie before, right? Easy money + bad discipline = unbalanced risks. We could easily see here a protracted period when the mining industry consolidates and allows various investment capitals to enter the market.
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CT: Why is now a good or bad time to start mining? Are there any specific network metrics or profitability metrics that you pay attention to, or is it just your gut feeling?
TE: As a rule, periods of distress and shifts in the accepted paradigm give advantages to new participants. Our only goal is to take advantage of these new opportunities.
CT: If I have $1 million in cash, isn’t it time to set up an operation and start mining? What about $300,000, $100,000, $10,000? Why, in the $40,000 to $10,000 seed fund range, is now not the right time to set up a home or industrial mining farm?
TE: If you have $1 million in cash, this might be the right time to randomly pick up some BTC. Fully loaded production prices for major miners are not far from these levels, and I believe that it will be difficult to maintain these levels until ASIC prices drop even more. I think the time for home mining has largely passed as a result of the new dynamics in the energy industry.
I would advise those looking for income to look for mining opportunities with companies like Compass Mining or other “cloud” miners whose hardware and energy contracts could make an attractive investment as this dynamic shifts.
We believe that as a result of current and expected market disruptions, as well as increased acceptance of immersion solutions, there will continue to be attractive opportunities for scale-up mining operations.
CT: Will the price of bitcoin drop below its previous all-time high for the first time have any significant impact on the fundamentals of the asset and the industry going forward?
TE: In our opinion, no. Historical comparisons are hard to rely on when dealing with a new commodity and a transformative technical asset like BTC. Miners mine BTC with a given set of inputs (computing power, access to capital and energy), and the output price does not reflect the cost of production at all.
Large-scale mining of BTC is fundamentally not much different from mining oil and gas or other commodities. Improvements in drilling technology have changed North America’s position in the global energy markets.
When oil and gas prices plummeted in the early stages of the pandemic, no one questioned whether we needed to drive more cars or heat our homes. Mining supports the blockchain, and proof-of-work computing will prove that our network can transition to renewable energy in the future.
We strive to be innovative and constructive contributors to this industry as it continues to evolve.
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Credit : cointelegraph.com